There is a widespread fear of a global economic meltdown. Particularly today, it is visible to everyone how critical Supply Chain performance is. A well-run Supply Chain ensures that we all get our daily goods such as toilet paper, hand sanitizers, masks, tests and drugs.
For the Supply Chain Manager and the CEO, experiencing such a major crisis for the first time, it can be challenging to navigate both mentally and operationally in this challenging environment. That’s why we have gathered a crisis checklist. The checklist is of course not covering all aspects, but it can work as a starting guide.
The following crisis checklist is of course not covering all aspects, but it can work as a starting guide.
Crisis checklist step 1: Move the crisis into the boardroom
Like never before, the Supply Chain has the attention of the board. A survey conducted by PwC showed that 9,34% of the CFO’s said Supply Chain issues were among their top 3 concerns in the current climate. That being said, 30% of the companies where thinking about making changes to their existing Supply Chains. The conclusion is though that the duration of the impact is the most important factor. It is expected that the learnings from the outbreak will most likely move the competitive forefront of Supply Chain operations toward more comprehensive, proactive modeling.
Crisis checklist step 2: Establish a war-team and understand your supply exposure
You should start out by asking yourself:
- What are the challenges, our supply chain is facing?
- What actions could be taken to tackle unexpected challenges?
- What is the short-term immediate action plan? Can we short term look at different sourcing strategies?
- What aspect of supply chain management is most challenging – demand forecasting, logistics, manufacturing?
If you have not already done so – establish your crisis team. Make sure it works cross functional. Some companies are working with daily dashboards in order to handle it operationally. It is not enough to handle the issues on a high-level track driven approach.
For many companies it means looking into production and part-level mitigation. It could also be beneficiary to look into your n-tier exposure, which means reaching out to tier-2 and tier-3 sources and risks. It is about being fact based: which components are affected, at what production burn rate and what is supposedly on-hand and in-transit.
A way to proactively mitigate risk is to build extreme scenarios. It could be: “this is a 100 year event”. If you do not have the digital software yet, short term operational solutions can be established if working agile and focused.
Crisis checklist step 3: Protect your employees and customers
The advice is to implement and overinvest in the best-known guidelines available for both employees and customers. Overcommunicating with full transparency is not possible.
Crisis checklist step 4: Defend against revenue decline
How will this effect business results and how are we minimizing the negative impact on business results?
Start by putting the customer in the centrum. How will you build trust, loyalty and market share through and beyond the crisis. Build specific revenue mitigation actions for core revenue stream declines. Pivot resources to pockets of current and future growth, online and beyond
Crisis checklist step 5: Plan urgent cost take-out to conserve cash
After stabilizing operations to “new normal” it is time to look at whether it is necessary to reduce cost in order to conserve cash. One of the ways to release cash is by looking at what you have in stock, what the demand looks like and how the processes are towards your suppliers. Research conducted by Optilon shows, that in average 22% of what companies have in stock is not necessary.
Crisis checklist step 6: Design your future Supply Chain around risk competitiveness
Already now companies are experiencing product and material shortages. For most of the companies the short-term focus is on getting things working. In the long term though, many companies are looking at rethinking their Supply Chains, making them less risk prone and creating contingency plans. Many companies are now realizing that they designed their operations with cost in mind. And not around risk competitiveness.
You could start out by asking yourself:
- What is our long-term action plan?
- How are we planning to reduce the risk posed by any future health crisis?
- Do we have any business continuity plans and protocols to hep us tackle this?
- What are the ongoing challenges for our supply chain moving forward?
While it is impossible to predict the outcome of this kind of crisis, maintaining and adapting your operations to these fast-changing events is complicated but possible. It is critical for you as a CEO, Supply Chain Manager or business leader in general to have a clear understanding of the disruption consequences and the actions required to restore your business foundation.
